Not many people know the ins and outs of bankruptcy proceedings. We’ve all heard of Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 bankruptcy, but what do they really mean? What is the difference between Chapter 7 and 13 bankruptcy? What about the difference between Chapter 7 and 11?
Chapter 7 Bankruptcy:
- At over 700,000 filings in 2013, Chapter 7 bankruptcy is the most common form of bankruptcy in the United States. It takes about six months to complete. Chapter 7 handles the liquidation of assets. Anything owned that isn’t protected under bankruptcy laws will be sold off to pay back creditors. A Chapter 7 bankruptcy can stay on your credit report for up to 10 years, and costs about $300 to file.
- Did you know? In 2012, Fear and Loathing in Las Vegas star Gary Busey filed for Chapter 7 bankruptcy.
Chapter 13 Bankruptcy:
- In 2013, over 300,000 Chapter 13 bankruptcies were filed. Whereas Chapter 7 bankruptcy focuses on liquidation of assets, Chapter 13 sets up a repayment plan. Bankruptcy proceedings are held to determine how you’ll repay your debt to creditors. These repayment plans typically last between three and five years, depending on the amount of debt. Another contrast to Chapter 7 bankruptcy is that, since liquidation does not happen, typically you can keep all of your assets.
- Did you know? Sherman Hemsley, better known as George Jefferson from All in the Family and The Jeffersons filed for Chapter 13 bankruptcy in 1999.
Chapter 11 Bankruptcy:
- Chapter 11 bankruptcy proceedings are more complex than the previous two. In 2013, only about 9,000 Chapter 11 bankruptcies were filed. It is similar to Chapter 13 bankruptcy in the sense that both allow a company to remain in business. Chapter 11 allows debtors to reorganize and restructure their debt. Due to its complexity, there are far fewer bankruptcy lawyers that handle Chapter 11 bankruptcy.
- Did you know? Famous businessman and politician Donald Trump has filed for Chapter 11 bankruptcy four times since 1991.
If you have any questions, feel free to share in the comments.